...Prize in economics that economic ethics is a prerequisite for the development of the economies of the world factor. Historically, the company has focused on the management of its tangible assets to protect its reputation through a financial impeccable acting. In the Lehman Brother lacked ethics. Few years ago was enough Appear in the market for a company to be accepted by its stakeholders, but it is no longer acceptable consumer confidence has worsen by extremely serious corruption scandals and empty moral that last years have plagued economic sectors as if Bear Stearns Lehman Brother, Madoff, the energetic (Enron), telecommunications (WorldCom), and in racing a (Toyota). The culture in the majority of the big companies is the same in some cases as Lehman Brothers, some CEO, don’t have the time to review the statements for that reason the company hiring a some person who take charge of this politics, but in the case of Lehman’s Brothers is different because the CEO of the company knows what happen, When Lehman Brother beginning to use the money to buy toxic stocks and bonds is this the beginning of the fall of Lehman Brother. In the other hand the ethic is lack in Lehman Brother in other companies like Lehman is talking about Enron has the same problems of Lehman their finance is not clear they starting use the money they have to purchase toxic stocks the shareholders try to cover their actionist and use the same method of Lehman, and this situation will continue because the...
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...Header: Bear Stearns Corporate Governance Issues at Bear Stearns Article Summary: In the summer of 2008 the global financial crisis swept away trillions of dollars in net worth, wiping out people’s retirement savings, and causing the loss of millions of jobs. As the world slipped into recession, people looked for answers, and a place to rest blame. At Bear Stearns, a venerable financial firm which was brought down by mistakes made by decisions made by management, there is much blame to be shared. This paper seeks to explore the corporate governance decisions which created this crisis, and which ultimately led to the almost complete destruction of shareholder value for Bear Stearns’ investors. In good times, the shareholders at Bear Stearns were handsomely rewarded by the very decisions which would ultimately end the company’s storied 85 year history and send the global economy into the deepest and most painful recession since the great depression. The firm’s stock traded at $160 a share and several key executives held stock valued at almost $1 billion dollars, but it is clear that hubris, greed, and incredible egos and personality conflicts were the cause of the firm’s demise. In May of 2008, The Wall Street journal published a three part series written by Kate Kelly on the last days of Bear Stearns. Kelly’s articles consider all the factors which brought about the company’s demise, and provide insight into the corporate governance issues which helped seal Bear Sterns...
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...more than 158 years is no longer in business. On September 15th 2008, the Lehman Brothers, which was once know as one of the biggest investment banks, provided that it was going to file for bankruptcy protection (Mamudi). This news was received by the world at the time the market was expecting that someone will come out and help this organization. The bankruptcy of the Lehman Brothers was not expected by anyone, and many people hoped that either a private company or the government was going to bail out the firm and prevent the bankruptcy move. Before that, there were talks indicating that, Barclays bank and Bank of Africa wanted to take over the investment bank (Sorkin). However, other organizations like the Federal Reserve that aided Bear Stearns to deal with the US Treasury were not willing to help the Lehman Brothers with their problem (Sorkin). The firm filed for bankruptcy with about $639 billion in assets and about $619 billion in debt, which makes its bankruptcy filing the largest in history, while its assets surpassed the assets of the previous bankrupt giants like Enron and WorldCom. According to Qatinah (2012), the organization was the fourth largest US investment bank at the time it collapsed, with more than 25,000 employees. The history of the Lehman Brothers can be traced back to 1844 when Henry Lehman travelled to the US for Bavaria and decided to settle in Montgomery, Alabama. He opened store “H. Lehman” that dealt in dry goods. The name of the firm was changed...
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...BIG TO FAIL? WILLIAM RYBACK LEHMAN BROTHERS: TOO BIG TO FAIL? Copyright by the Toronto Leadership Centre. This case was prepared exclusively for a class discussion at a Banking, Insurance or Securities session offered by the Toronto Centre. Information has been summarized and should not be regarded as complete or accurate in every detail. The text should be considered as class exercise material and in no way be used to reach conclusions about the nature or behaviour of any of the persons or institutions mentioned.. No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form without the permission of the Toronto Leadership Centre for Financial Sector Supervision. Sources: This document is based on information that was in the public domain at the times mentioned or which became public after the resolution of the issues. It does not include information confidential to the financial institution involved. 1 LEHMAN BROTHERS: TOO BIG TO FAIL? WILLIAM RYBACK This case study is written and presented by William Ryback, former special advisor to the Financial Supervisory Service in Seoul, Korea; Deputy Chief Executive of the Hong Kong Monetary Authority; and career bank supervisor in the United States. The material presented is derived from public media sources. INTRODUCTION In this case study an example of a large bank failure and its after effects on the financial markets is presented and raises issues...
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...Parker J Investment Banking Even though Bear was involved with investment trades around the world, the Fed did not grant Bear a government bailout. The Fed did step in to help maintain stability for the market, but LTCM for Bear was out of luck. Bear differed from its downward pressure on global securities prices, market stability, the possibility and probability to crash fast and hard, and the market environment was simply too hectic. Well first and foremost, the biggest change that could have been made, would be to hold the bridge tournament a couple months earlier. I believe that would have changed the outcome of Bear Stearns and allowed Cayne to save the day. All joking aside, from reading the article or case study, CDO’s and ARM’s were not the only destruction of Bear, just the final blow. Similar to what is happening in China right now with failing/decreasing hedge funds, Bear called in $500 million of short term debt to cover its losses from an unprofitable hedge fund. There was also a $38 million dollar fine paid to the SEC for fraudulent behavior. They were caught up in the CDO craze like everyone else and accepted way too many mortgages without knowing the details. Cayne must not have grasped the situation in its entirety. I can’t believe he announced they had $11.4 billion in cash and was now taking the situation seriously. The hole was much deeper than that. March 10, 2008, I believe, is where they were caught in the biggest fraud. Even though they didn’t...
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...Barclays Acquisition of Lehman Brothers Background Barclays PLC, one of the main saving banks in the United Kingdom, agreed Sept. 16, 2008, to purchase the volume of Lehman Brothers Inc. for $1.75 billion. It has acquired parts of Lehman's equities commerce in Europe and took on some Lehman workers in Asia. Lehman, the fourth major asset bank in the United States, was one of the victims of the subprime advance disaster that led to the administration stand security of Bear Stearns in March 2008 and the conquest of advance giants Fannie Mae and Freddie Mac by the U.S. Treasury in advance in September of 2007. Worth as much as $45 billion in early 2007, Lehman incurred almost $4 billion in losses in the third quarter has seen its stock worth fall down and was faced with disciplinary downgrades in its credit rating, which would have made it tremendously hard to raise much-needed capital. (Clark, 2008) Fuld who was the Head of Lehman sought Chapter 11 bankruptcy defense for Lehman on Sept. 15 2007 after U.S. Treasury Secretary Henry Paulson made it obvious that the administration would not spend any of taxpayers money to fund any of Lehman’s faulty asset. Under Chapter 11, which shields a corporation from creditors' lawsuits while it reorders its finances, Lehman became more attractive to Barclays; the British bank then bought Lehman's choicest bits devoid of assuming its more than US$600 billion in liabilities. Under the terms of the contract, which got approval from the insolvency...
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...Investment Banking in 2008 (A): Rise and Fall of the Bear 1. What role did Bear’s culture play in its positioning vis-à-vis its competitors, and what role might that culture have played in its demise? Bear Stearns played a risky role with the promise of high returns. Bear was participating in the LTCM and created a bubble. Bear’s competitors recognized and hedged against risk by participating in the buyout while Bear Stearns ignored the bullish market. Other banks hired both externally as well as internally so they received other opinions and perspectives, but Bear Stearns only hired internally. Bear ignored concerns while others hedged for possible risk. While all the banks were losing money from CDO’s, Bear’s losses were the most looked at and brought the most fear. 2. How did Bear’s potential collapse differ from that of LTCM in the eyes of the Federal Reserve? Bear Stearns had a chance to contribute to the bail out which may have saved them. The LTCM demanded high returns and the market could not satisfy these expectations. Bear should have learned from the LTCM collapse so one thing that differed is the banks had more knowledge after the collapse and should have done things differently. Also, it was a less turbulent market when Bear collapsed. 3. What could Bear have done differently to avoid its fate: 1. In the early 2000s? In the early 2000s, Bear Stearns tried to issue shares that were later called “toxic waste” so the bank...
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...WORST AND BEST CEOS OF 2008 Jamie Dimon, 52 CEO, JPMorgan, New York Dimon largely shunned the subprime bets and exotic financial instruments that brought down rivals. As a result, JPMorgan was able to pick up the pieces of Bear Stearns when it imploded in March and later absorb collapsed mortgage lender Washington Mutual. That doesn’t mean JPMorgan is immune to the turmoil. “We are not holding ourselves up as paragons of virtue,” says Dimon. “We were not exceptional in every category. But if you don’t do a good job for the customers, you’re never going to do a good job for the shareholders. That’s the point of a commercial enterprise.” Takeo Fukui, 64 CEO, Honda, Tokyo While it has outperformed rivals with fuel-efficient small cars, even Honda sees fewer sales. Fukui has cut costs, but he refuses to skimp on innovation and research. Best advice he’s received: “The basic social responsibility of a business is to both maintain employment and meet the obligation to pay taxes.” Great book: How to Stop Worrying and Start Living by Dale Carnegie. “Regardless of my job description, as an engineer or member of company management, this book provided spiritual support when I faced difficult challenges in the business world.” Jim Sinegal, 73 CEO, Costco, Issaquah, Wash. Many retailers scrambled to raise prices this year amid rising costs. Not Sinegal. He held back price increases longer than his peers to gain market share for his membership-only chain. The move paid off: 87%...
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...IRAC Brief: JP Morgan Chase Settles the London Whale This is a case study analysis of a current legal case regarding the governance principles of regulatory compliance and the methods used to manage risk arising. The briefing of this case will utilize the IRAC method of case analysis to give a breakdown on the case of JP Morgan Chase on regulatory violations and risk management. The IRAC method will address I - Issue, R - Rule, A - Analysis, and C - Conclusion which will provide a researched assessment of the trading loss violations on this case. Please read and review this analysis of the case utilizing IRAC method of case analysis. Issue JP Morgan Chase permitted traders in its London office to allocate magnified values to transactions and cover up huge losses as they continued to explode. Two traders could face criminal charges for fabricating records to cover up losses. JP Morgan’s charge to the $6 billion oversight in trading loss is the first for a main company since the Securities and Exchange Commission revised its practice of letting firms pay fines without admitting fault. An admission by JPMorgan could provide a pattern for pursuing other admissions in Wall Street cases. The Justice Department is aggressive in getting JPMorgan to admit that from 2005 to 2007, it sold mortgage securities to investors without fully warning of the risks. By wanting the bank to admit some responsibility, officials hope it will caution other corporations to double check before taking...
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...Bankruptcy of Lehman Brothers Causes CAUSES Malfeasance A March 2010 report by the court-appointed examiner indicated that Lehman executives regularly used cosmetic accounting gimmicks at the end of each quarter to make its finances appear less shaky than they really were. This practice was a type of repurchase agreement that temporarily removed securities from the company's balance sheet. However, unlike typical repurchase agreements, these deals were described by Lehman as the outright sale of securities and created "a materially misleading picture of the firm’s financial condition in late 2007 and 2008 Subprime mortgage crisis In August 2007, the firm closed its subprime lender, BNC Mortgage, eliminating 1,200 positions in 23 locations, and took an after-tax charge of $25 million and a $27 million reduction in goodwill. Lehman said that poor market conditions in the mortgage space "necessitated a substantial reduction in its resources and capacity in the subprime space". In 2008, Lehman faced an unprecedented loss to the continuing subprime mortgage crisis. Lehman's loss was a result of having held on to large positions in subprime and other lower-rated mortgage tranches when securitizing the underlying mortgages; whether Lehman did this because it was simply unable to sell the lower-rated bonds, or made a conscious decision to hold them, is unclear. In any event, huge losses accrued in lower-rated mortgage-backed securities throughout 2008. Short-selling allegations...
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...2015-Ohio-1380 CARRIE REBELLO PLAINTIFF-APPELLANT v. LENDER PROCESSING SERVICES, INC., ET AL. DEFENDANTS-APPELLEES No. 101764 Court of Appeals of Ohio, Eighth District, Cuyahoga April 9, 2015 Civil Appeal from the Cuyahoga County Court of Common Pleas Case No. 12-CV-785870 ATTORNEYS FOR APPELLANT: Andrew A. Kabat Daniel M. Connell Haber Polk Kabat, L.L.P ATTORNEYS FOR APPELLEES James E. Davidson Mary F. Geswein Ice Miller L.L.P. BEFORE: E.A. Gallagher, P.J., E.T. Gallagher, J., and Laster Mays, J. JOURNAL ENTRY AND OPINION EILEEN A. GALLAGHER, PRESIDING JUDGE {¶ 1} Plaintiff-appellant Carrie Rebello appeals from the trial court's judgment entering a directed verdict on her claim for wrongful discharge in violation of public policy against defendants-appellees Lender Processing Services, Inc., et al. (collectively, "LPS").[1] Rebello claims that she was wrongfully terminated in violation of public policy from her employment at LPS because she objected to, and threatened to, report LPS's practice of password sharing among LPS employees when accessing the nonpublic customer information of one of its largest clients, JPMorgan Chase Bank, N.A. ("Chase"). For the reasons that follow, we reverse the trial court's judgment. Procedural and Factual Background {¶ 2} LPS is in the business of providing processing, technology and field services to clients, including mortgage lenders and financial institutions. The services provided by LPS include inspections...
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...| |Financial Management | |[2007 Financial Collapse] | |This report will inform you of how the lack of oversight and management caused the financial collapse and the housing market to plummet. | [pic] TABLE OF CONTENTS Introduction………………………………………………..………… The History…………………………………………………………… Causes………………………………………………………………. The Run Up………………………………………………………… Lehman Brothers………………………………………………… Bank of America…………………………………………………… Fallout……………………………………………………………… Conclusion………………………………………………………… INTRODUCTION In 2007, the United States was in the midst of the largest mortgage and financial crisis since the Great Depression. The impact of the financial collapse caused many Americans to lose their homes and their jobs. Across the country, mortgage delinquencies and foreclosures have hit an all-time recorded high, with 11% of loans currently two or more payments behind. Complicating matters, 24% of borrowers are “underwater,” having mortgage balances greater than the values of their homes. The lack of financial management caused two large investment banks and the largest insurance firm in the world to cripple the Dow Jones Industrial Average by nearly 30% within 2-3 weeks. The financial collapse did not just affect home owners, but many financial firms were now facing...
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...Background: On September 15, 2008, Lehman Brothers Holding, Inc. filed a petition in the US Bankruptcy Court for the Southern District of New York seeking relief under Chapter 11 of the US Bankruptcy Code. With total debt close to $800 billion, Lehman was the largest US bankruptcy in the history. Lehman’s share lost over 90% of its value on the announcement date and the Dow Jones Industrial index closed over 500 points down from the previous day, one of the single largest one-day point drops since September 11, 2001. Immediately in the aftermath of Lehman’s bankruptcy, over a hundred firms disclosed their financial exposure to Lehman. Lehman’s collapse, soon became the international economic crisis which affects the different aspects of the regional economic worldwide. The seeds of the crisis can be traced to the low interest rate policies adopted by the Federal Reserve and other central banks after the collapse of the technology stock bubble. In addition, the appetite of Asian central banks for (debt) securities contributed to lax credit. These factors helped fuel a dramatic increase in house prices in the United States and several other countries such as Spain and Ireland. In 2006, this bubble reached its peak in the United States and house prices here and elsewhere started to fall. The fall in house prices led to a fall in the prices of securitized subprime mortgage, affecting financial markets worldwide. In August 2007 the interbank markets, particularly for terms longer...
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...Effects on management Merger & Acquisitions (M&A) term explains the corporate strategy which determines the financial and long term effects of combination of two companies to create synergies or divide the existing company to gain competitive ground for independent units. A study published in the July/August 2008 issue of the Journal of Business Strategy suggests that mergers and acquisitions destroy leadership continuity in target companies’ top management teams for at least a decade following a deal. The study found that target companies lose 21 percent of their executives each year for at least 10 years following an acquisition – more than double the turnover experienced in non-merged firms.[10] If the businesses of the acquired and acquiring companies overlap, then such turnover is to be expected; in other words, there can only be one CEO, CFO, et cetera at a time. Types of M&A by functional roles in market The M&A process itself is a multifaceted which depends upon the type of merging companies. - A horizontal merger is usually between two companies in the same business sector. The example of horizontal merger would be if a health cares system buys another health care system. This means that synergy can obtained through many forms including such as; increased market share, cost savings and exploring new market opportunities. - A vertical merger represents the buying of supplier of a business. In the same example as above if a health care system buys the ambulance services...
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...part of the paper describes this trend towards the “originate and distribute” model and how it ultimately led to a decline in lending standards. Financial innovation that had supposedly made the banking system more stable by transferring risk to those most able to bear it led to an unprecedented credit expansion that helped feed the boom in housing prices. The second part of the paper provides an event logbook on the financial market turmoil in 2007– 08, ending with the start of the coordinated international bailout in October 2008. The third part explores four economic mechanisms through which the mortgage crisis amplified into a severe financial crisis. First, borrowers’ balance sheet effects cause two “liquidity spirals.” When asset prices drop, financial institutions’ capital erodes and, at the same time, lending standards and margins tighten. Both effects cause fire-sales, pushing down prices and tightening funding even further. Second, the lending channel can dry up when banks become concerned about their future access to capital markets and start hoarding funds (even if the creditworthiness of borrowers does not change). Third, runs on financial institutions, like those that occurred at Bear Stearns, Lehman Brothers, and Washington Mutual, can cause a sudden erosion of bank capital. Fourth, network effects can arise when financial institutions are lenders and borrowers at the same time. In particular, a gridlock can occur in which multiple trading parties fail...
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